Bank Charges HSN Code: Understanding HSN Classifications for Bank Charges
Banks charge many types of fees such as account maintenance charges, cheque book charges, ATM charges and loan processing fees. For correct GST treatment, these bank charges must be mapped to the right HSN or SAC code in every invoice and ledger.
In this guide you will learn the main bank charges HSN code, how different banking services are grouped under this code, what GST rates usually apply and how banks and businesses use these codes in GST billing and return filing.
What Is the Bank Charges HSN Code?
Under GST, services use a service accounting code that works like HSN for goods. Financial and banking services are grouped in chapter ninety nine under the service code 9971. This code is commonly treated as the bank charges HSN code for most taxable banking services.
Within the family of 9971 codes, different detailed numbers cover deposit services, credit granting services, card related services and many other financial activities. For day to day GST work, banks and many businesses that record bank charges simply tag them under 9971 when they are taxable services.
Using 9971 as the base bank charges HSN code ensures that financial services are clearly separated from trading of goods in GST records. It also helps the tax department apply the correct rules for exemptions and rate changes that are specific to financial services.
| HSN Code | Product Description | Product Type or Variant | GST Rate |
|---|---|---|---|
| 9971 | Financial and banking services | General taxable bank charges and service fees | 18% |
| 997111 | Central banking services | Central bank and monetary authority services (many supplies exempt) | — |
| 997112 | Deposit services | Account maintenance, minimum balance and cheque related charges | 18% |
| 997113 | Credit granting services | Loan processing, documentation and similar credit related charges | 18% |
| 997119 | Other financial services | Other taxable banking services and miscellaneous bank charges | 18% |
HSN Code for Bank Charges and GST Rate
Most routine bank charges like minimum balance charges, cheque dishonour fees, demand draft fees, locker rent charges and loan processing charges are covered under the broad heading 9971 for financial and banking services.
Inside this group, codes such as 997111, 997112, 997113 and 997119 are often used for central banking services, deposit services, credit granting services and other financial services. Many commercial banks map their detailed charge codes to one of these service codes in their internal systems.
For a normal business that is only accounting for bank charges shown on its bank statement, it is usually enough to treat taxable bank fees as services under 9971 in the purchase ledger. The detailed split between specific sub codes is handled at the bank end for their own output service invoices.
Some special banking services can enjoy a concessional rate or complete exemption, for example certain card settlement services for small ticket transactions or services directly provided by the central bank. These special cases still sit inside the 9971 family but follow separate notification entries in the GST rate schedule.
GST on Bank Charges and HSN Code Classification
The standard GST rate for most taxable bank charges under heading 9971 is 18% on the value of the service. This rate commonly applies to fees such as processing charges, account service charges, cheque bounce charges, card annual fees and other similar banking services.
Some items shown in bank statements do not attract GST. Interest income on loans, advances and deposits is generally exempt, so interest debits and interest credits are usually outside the scope of GST. Only the service fee portion, such as a separate processing charge, is normally taxable at 18%.
Services by the Reserve Bank of India are fully exempt from GST. In addition, certain acquiring bank services for settlement of small value card transactions up to a notified limit may carry a GST rate of zero for the acquiring bank, subject to the conditions given in the notification.
Because of these mixed rules, the same bank statement can show both taxable and exempt lines. The HSN or SAC code 9971 is used only for the taxable banking services that fall under financial and related services. Exempt lines like interest are reported under the exemption provisions rather than under 9971 in GST returns.
For GST filing, banks issue tax invoices or statements that show the value of taxable services, the applied GST rate and the service code 9971 or a more detailed sub code. Businesses that pay these charges then claim input tax credit on the GST part, subject to normal conditions, by booking the bank charge with the correct HSN or SAC reference in their purchase records.
Correct use of 9971 for bank charges also helps during audits, because tax officers can quickly see how much of the bank related expenditure was taxable, how much GST credit was claimed and whether any exempt services were wrongly treated as taxable or the other way round.
Conclusion
The bank charges HSN code is an important part of GST compliance for both banks and their customers. Financial and banking services are grouped under the service code 9971, with detailed sub codes for different types of services.
When taxable bank charges such as service fees, processing charges and card fees are mapped to 9971 and the standard GST rate of 18% is applied, invoices remain accurate and input tax credit can be claimed smoothly where allowed. At the same time, exempt items like interest and notified zero rated services are kept out of this code, which reduces the risk of GST disputes and penalties on bank charges.
I’m CA Chintan Rathod, a Chartered Accountant based in Nagpur with over 4 years of experience. I specialise in Taxation, helping individuals and businesses plan and file their taxes accurately while staying compliant with the latest regulations. My approach is focused on practical, easy-to-understand guidance so clients can make better financial decisions with confidence.
Frequently Asked Questions
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What is the HSN code for bank charges in India?
In India, most taxable bank charges are classified under the service code 9971, which covers financial and related services. Banks may use more detailed sub codes inside this family, but 9971 is the common base code used for bank charges.
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How does the HSN code for bank charges affect GST?
The bank charges HSN code 9971 links banking services to the GST rules for financial services. It decides which GST rate applies, whether any exemption is available and how these services should be reported in GST returns for both banks and their customers.
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Are there different HSN codes for various bank charges?
Yes. Within the 9971 family, sub codes like 997111, 997112, 997113 and 997119 can cover specific services such as deposit services, credit granting services and other financial services. Even so, many users treat all taxable bank charges under the broad heading 9971 in their own accounts.
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How do banks use the HSN code for GST filing?
Banks tag each taxable service with the correct code in the 9971 group in their billing system and show this on tax invoices and statements. They then file GST returns with service wise and code wise summaries so that all taxable bank charges are reported under the correct category.
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What GST rates apply to bank charges under HSN code?
Most taxable bank charges under the 9971 heading attract GST at 18%. Certain services like interest on loans and deposits are exempt, and a few notified card settlement services may have a zero rate for the acquiring bank, but everyday bank fees are usually charged at 18%.